Advice for the Prospective Home Owner
Becoming a home owner is exciting when it is your first time. Although veteran consumers find little thrill in searching high and low for a new residence, everything in the home buying experience is new to someone who has never purchased anything more expensive than a car. Here are a few things that you can do to prepare if your are planning to purchase a home for the first time in the near or distant future.
Consider Financing
The average first time buyer seeks a loan to cover much, if not all, of the price of the home. When considering a mortgage, think about the price of the loan in relation to your income. You know that you can afford the home if:
- You have three to four months worth of payments in your savings account.
- Your debt to income ratio shows that no more than 28% of your income is used on the mortgage.
- You won’t have to take out a loan for emergencies. Savvy owners save at least 3% of their monthly income for random repairs.
Showing proof of these things only improves your chances of being approved for a loan at the lowest possible rate.
Start Saving for The Down Payment
First time buyers have the option of putting three percent of the home’s value down but should consider 20 percent instead. More upfront cash means less money borrowed, which leads to more money saved over time. Such display of stability also tells lenders that you are more than ready to take on the financial responsibility involved with home ownership.
Check Your Credit
The minimum credit score for a home loan in this economy is around 580. You should, however, seek to have a credit score of at least 700 for the sake of better interest rates and faster approval. Many loan companies require more documentation and insurance when the borrower’s credit rating falls below 700. Such consumers can definitely expect to pay more over the life of the loan.
Create a Checklist of What You Want
You should never rush the process of choosing a home because, more than likely, you will be living in the residence for the next 20 to 30 years. It is, therefore, important to create a checklist of necessary amenities. If you have children, for instance, you may want a home that has two bathrooms instead of one. A large kitchen with dining area may also be vital since the family will be spending a significant amount of time there.
Hire A Good Agent
All real estate agents are not the same. Some are ambitious while others take the laid back approach when closing the deal. An agent should match your personality and desires. If you are anxious to find a residence rather quickly, then someone with a large database of homes for sale would be ideal. If, on the other hand, you are not as eager to settle into a new abode, then having a salesperson who likes to take his time finding space would be more helpful.
Remember This…
Buying a home is not like renting an apartment. You will have full responsibility for all repairs in addition to paying taxes on the property two times per year. Living from paycheck to paycheck is not a good way to go about life as a property owner and living beyond your means is not an option once you decide to buy a house. You should strive to eliminate all credit card debt before seeking out a mortgage, and refrain from applying for any type of loan the year before you sit down with a financial adviser to purchase property. Changing jobs during the approval process is also not in your best interest as such activity may signify a lack of stability. Buying a home is a big task that only the well prepared should undergo.